Money market
Nigeria’s inflation rate to rise to 22.2% year-on-year — Coronation Merchant Bank
Coronation Merchant Bank has forecast a year-on-year increase in Nigeria’s inflation rate to 22.2% ahead of the release of the National Bureau of Statistics’ August inflation report.
Ms Chinwe Egwim, the bank’s chief economist, stated this on Wednesday during a panel discussion at the Chartered Institute of Bankers of Nigeria’s (CIBN) 15th Annual Banking and Finance Conference in Abuja.
The National Bureau of Statistics (NBS), stated that Nigeria’s headline inflation rate increased to 19.64% on a year-on-year basis in July. This means that in the month of July 2022 the general price level was 2.26% higher than in July 2021. On a month-on-month basis, the headline inflation rate in July 2022 was 1.817%, which was 0.001% higher than the rate recorded in June 2022 (1.816 %).
Egwim said, “Now, from our vantage point at Coronation, looking ahead in Nigeria, we expect further upticks in headline inflation. Our end-year forecast has inflation hitting 22.2 per cent on a year-on-year.
“This projection took into consideration modest increases in the month-on-month inflation. Our forecast is also influenced by structural issues impacting the cost of doing business such as insecurity and the impact of the Russia-Ukraine crisis on the economy.”
She also stated that the naira will see a surge in circulation at the end of the year, as this would be the peak of electioneering for the 2023 elections.
According to her, this is likely to cause some level of demand-pull inflation, as opposed to the existing cost-push inflation.
“Based on our model, headline inflation should moderate to about 17.28 per cent in 2023 and then it should maintain a downward trajectory to 11.35 per cent by 2025.
“We assume that the ongoing crisis would cease or that a workable solution to supply-side shocks and severe cost push inflation would be implemented, in addition to other assumptions,” she said.
On economic diversification, which includes non-oil exports, Egwim stated that if Nigeria’s non-oil export potential was maximized, a 2% increase in non-oil GDP could be achieved on a quarterly basis.
According to her, the 2% prediction excludes any major contractions in oil GDP or assuming that GDP maintains at its current level, as well as assuming that oil prices remain at or exceed 70 dollars per barrel.
She said, “Overall GDP can hit double-digit if we see a two per cent growth on a Q-on-Q basis and if we impose that across quarters, dragging all the way to 2025. We can see it hit as high as 11.25 per cent and a doubling essential if we are going to achieve inclusive growth, which is important to tackle the poverty levels that we are currently seeing.
“To support this diversification towards non-oil, banks can contribute in many ways, like accelerating the drive around sensitisation programmes, fairs and campaigns. This will help micro small and medium-sized businesses equip themselves with tools to enhance their eligibility with regards to gaining access to finance or gaining access to business expansion support.”
According to Egwim, it is crucial to maximize Nigeria’s non-oil export potential in light of the most recent foreign trade statistics made public by the NBS.
She claimed that in the first half of 2022, non-oil exports made up barely 26% of all exports.
She cited obstacles, a lack of infrastructure, and the caliber of present export goods as concerns affecting non-oil export growth.
Other problems, according to Egwim, involved production value chains and the value addition of certain export goods, particularly in the agriculture industry.
…Counts gains of previous edition of investment summit
By Matthew Denis, Lafia
The Governor of Nasarawa state, Engr. Abdullahi Sule has taken steps to woo investors to invest in the state at the ongoing Nasarawa Investment Summit.
Delivering his opening speech, Governor Sule disclosed that the state is expanding the existing industrial, agricultural and mining sectors towards a better economy.
He said, “What we are witnessing today will further expand our existing pathways to leverage on the industrial, agricultural and mining sectors towards enhancing inclusive and sustainable wealth creation and economic prosperity.
“It is with a sense of fulfillment and responsibility that I address you today on the occasion of the Nasarawa Investment Summit, 2024.
“I must acknowledge our most cherished investors and other development partners, who are here to be part of this auspicious occasion. I have no doubt that the coming together of these distinguished and eminent personalities will, no doubt offer us the opportunities to continue to map the future of our State economic landscape in our relentless commitment to explore business opportunities and forge investment partnerships across business endeavour.”
The Governor stressed that it is pertinent to remind you that Nasarawa State organised the first edition of the Nasarawa Investment Summit in 2022 under the theme “Diamond in the Rough: The Making of a New Investment Frontier,” aimed at ushering investment and showcasing our mineral resources to potential investors.
“I am happy to state that the outcome of the Summit informed the influx of investors into the State Who are variously harnessing our God-given endowment.
“Interestingly, the recently commissioned Avatar New Energy Materials Company Limited in Nasarawa State performed by Mr. President, the ASGARD Mining and Processing Plant, Karu, the Nasarawa Technology Village Project in Karu, as well as other numerous investments being carried out in the State were all informed by the outcome of the Summit conducted in 2022.
“It is also heartwarming to state that the Federal Government commissioned the spud-in of the Ebenyi-A Oil Well in Obi Local Government Area of the State. The discovery of Oil and Gas and its subsequent exploration and exploitation will further boost the economic prosperity of our dear country and put Nasarawa State among the comity of Oil producing States.
“I, therefore, call on the investors on Oil and Gas to take advantage of the exploration activities to begin to invest in the sector for the benefit of the society.”
“To ensure full utilisation of our potentials, we have pledged to sustain the Investment Summit in order to further showcase other solid mineral resources which are yet to be identified by interested investors. This is why the theme of this year’s Summit is deliberately coined as ‘The Industrial Renaissance,’ having built some of the key fundamentals required to drive our industrial agenda and present other minerals to our potential investors.”
He explained that the staging of the 2024 Nasarawa Investment Summit,which we are witnessing today will further expand our existing pathways to leverage on the industrial, agricultural and mining sectors towards enhancing inclusive and sustainable wealth creation and economic prosperity.
“It is pertinent to point out that, as a State, we have been deliberate in stimulating our economy, building human capacities, creating wealth and generate employment to our people. It is for this reason that we have adopted our policy document christened ‘Nasarawa Economic Development Strategy (NEDS)’ as a driving force towards the initiation and implementation of various programmes and policies which we have achieved so far.
“I must acknowledge that with the assemblage of the experienced and versatile resource persons to engage the participants on the topics earmarked for discussion, I believe that the outcome of this Summit will go a long way towards actualizing our dream of industrialising Nasarawa State and position it as a leading champion.”
While applauding President Bola Ahmed Tinubu for his sustained effort in driving the Nigeria economy to prosperity, he said, “I assure Mr. President of our unalloyed loyalty and continued support in order to take our country to greater heights.”
“Let me as always, call on our development partners to continue to invest in Nasarawa State with the view to open the frontiers of economic prosperity for the benefit of all. Indeed, Nasarawa means business.”
The Central Bank of Nigeria (CBN) has activated plans to double foreign-currency remittance flows through formal channels by granting 14 new International Money Transfer Operators (IMTOs) Approval-in-Principle (AIP).
Nigeria’s Debt Management Office (DMO) sold N378 billion in FGN bonds yesterday despite facing higher than offered demand for the bonds, indicating the government is slowing down on borrowing cost.
Analyst at Afrinvest West Africa, Segun Adams said that at the auction DMO sold 1.52 times its offer.
“The decision to sell 44.2 percent of papers issued to non-competitive bidders suggests DMO’s mindfulness of the growing cost of borrowing on the Federal Government,” he said.
The DMO auctioned N450 billion FGN bonds yesterday across three tranches. It issued a new nine-year bond and reopened a five and seven tenure at N150 billion each.
Preference was given to the new 9-year bond selling N285.12 billion, even though it was oversubscribed to the tune of N551.32 billion at a stop rate of 19.89 percent.
Adams said that it’s a trend we should expect for the near term as DMO attempts to manage its pressure on the fiscal side.
DMO sold N32.67 billion and N62.98 billion barely 40 percent of the initial offer on the 5-year and 7-year offer despite getting over N170 billion on both bids.
Analysts at CardinalStone explained in its most recent monthly fixed income report that at the long end (bond), they expect yield increases to be tamer.
This view is premised on the government’s decision to frontload a substantial part of its 2024 borrowings in the first quarter.
“Specifically, the Q2 ’24 bond auction calendar suggests that the government should raise between N300 billion — N600 billion monthly compared to the 2.5 trillion borrowings in Q1’24,” the report said.
The N2.5 trillion bond auction is the highest amount the government has attempted to raise in local bonds in one month.
The stop rates of the five and seven-year bonds were 19.29 and 19.74 percent respectively, which is marginally less than the stop rate on the one year Treasury bill considered less risky than longer-dated bonds.
The stop rate on the bonds is also well below the March inflation rate of 33.2 percent as price pressures remained prevalent in Nigeria.
The current benchmark interest rate stands at 24.75 percent, a 600 basis point increase from 18.75 at the beginning of the year.
At the previous bond auction a total of N626 billion was sold of the N450 billion put up.
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